At 08 Jan 2008 21:32:21 -0800 Jack Hamilton wrote:

> >But they don't. They give you a $150 phone for free.
>
> That's like saying "I charged it, so it was free." They have signed
> to a contract that guarantees them a future revenue stream, and that
> future revenue stream has a present value.


True, but the use of the phone requires service anyway. As long as the EFT
is equal or less than the subsidy, why not? You aren't really stuck with "
$1000" worth of service (2 years at $40/month), you're stuck with paying
the EFT to cancel- roughly the price of the discount.

> >They give you a $300
> >phone for $150 ...
>
> Assuming that it really cost them $300, which I doubt.

It doesn't matter what it costs to manufacture or procure- nothing else you
buy is sold for "cost" either. What matters is the difference between what
it will cost you to buy it with or without the contract. (And not
necessarily from the carrier- i.e. if you can get the same phone on eBay,
or a local dealer without contract cheaper.)

> Probably some
> phones are sold for close to the carriers's retail price, but almost
> certainly not all of them. If they weren't making money on the
> process, they'd stop doing it.

True- but they're making money either way; whether you pay the full
unsubsidized price, or re-up for two years. Again, the point is, if the
"Uberfone 5000", or whatever model you really want can be obtained $150-200
cheaper with a contract, why not? If circumstances change and you need to
break the contract, you pay the $150-200 EFT and no harm done- it was the
amount of the discount anyway.

Otherwise, two years later with the same carrier, that full price phone
without contract was $200 more, and you still spent two years with the
carrier- just without a contractual obligation.